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Press release from CNW Group

DHX MEDIA ANNOUNCES IMPROVED Q3 RESULTS

Thursday, May 12, 2011

DHX MEDIA ANNOUNCES IMPROVED Q3 RESULTS09:30 EDT Thursday, May 12, 2011www.dhxmedia.comTSX: DHXHALIFAX, May 12 /CNW/ - DHX Media Ltd. ("DHX Media" or the "Company") (TSX: DHX), a leading independent international producer and distributor of mainly children's entertainment content, announced its unaudited financial results for the three and nine months ended March 31, 2011.Highlights of Q3 2011 Results:(All amounts in Canadian dollars)Revenue of $12.3 million for the three months ended March 31, 2011 ("Q3 2011"), an increase of 37% (Q3 2010: $9.0 million);Gross margin as a percentage of revenue was 45% for Q3 2011, up from 37% for Q3 2010;EBITDA1 of $1.5 million for Q3 2011, an increase of 204% (Q3 2010: $0.5 million);  andNet income increased to $0.4 million for Q3 2011 (Q3 2010: $0.5 million loss).1 EBITDA represents net earnings (loss) of the Company before amortization expense, interest and other income (expense), non-controlling interest, equity income (loss), development expenses, stock-based compensation expense and one-time charges.Michael Donovan, Chairman and CEO, DHX Media commented, "We are pleased to report that DHX Media's business continues to rebound, lead by growth in our licensing group. The growth of our licensing revenue is reflective both of the success of our W!LDBRAIN Entertainment acquisition as well as the maturation of our business model towards one focused more on the management of children's brands.  The addition of Rastamouse to our library of children's titles and the significant opportunities it can provide in licensing is a prime example of that focus."Consolidated Statements of Income and Comprehensive Income Data Three MonthsEndedThree MonthsEndedNine MonthsEndedNine MonthsEnded  March 31, 2011March 31, 2010March 31, 2011March 31, 2010  ($000)($000)($000)($000)         (except pershare data)       (except pershare data)       (except pershare data)       (except pershare data) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Data:1         Revenues    12,279     9,015    43,785     31,390 Direct costs and amortization of film and television produced    6,772     5,677    26,258     19,177 Gross margin    5,507     3,338    17,527     12,213 Selling, general, and administrative    4,135     3,021    11,779     9,706 Impairment in value of certain investment in film and television programs                     -     151    450     385 Income (loss) before the following    1,050     (18)    4,201     1,452 Income (loss) from strategic investments    (10)    1    (28)    (23) Equity loss    (111)                     -    (265)                  - Foreign exchange gain (loss)    184     (102)    160     (534) Amortization, interest and other expenses, net    (639)    (547)    (1,623)    (1,645) Recovery of (provision for) income taxes    (122)    131    (808)    15 Net income (loss) and comprehensive income (loss)    352     (535)    1,637     (735) Basic earnings (loss) per common share    0.01     (0.01)    0.03     (0.02) Diluted earnings (loss) per common share    0.01     (0.01)    0.03     (0.02) Weighted average common shares outstanding (expressed in thousands)                      Basic    61,618     46,347    61,621     45,046  Diluted    61,939     46,347    61,945     45,046                    As at March 31,2011As at June 30,2010    ($000)($000)   Consolidated Balance Sheet Data:     Cash and short-term investments    27,017     22,018   Investment in film and television programs    37,688     29,892   Total assets    152,882     133,304   Total liabilities    71,044     53,125   Shareholders' equity    81,838     80,179         RevenuesRevenues for Q3 2011 were $12.28 million, up 36% from $9.02 million for Q3 2010. The increase in Q3 2011 was due to increases in producer and service fee revenues and the addition of DHX Wildbrain.Proprietary production revenues for Q3 2011 of $2.49 million were down 54% compared to $5.36 million for Q3 2010. The overall decrease was made up of a 23% decrease to $1.44 million (Q3 2010-$1.88 million) in proprietary production revenue for DHX Halifax, a 73% decrease to $0.92 million for Q3 2011 (Q3 2010-$3.44 million) for DHX Toronto, and a 225% increase to $0.13 million for DHX Vancouver (Q3 2010-$0.04 million).For Q3 2011, the Company accounted for 32.5 half-hours - $2.49 million of proprietary film and television program production revenue versus the 62.0 half-hours for Q3 2010, where the programs have been delivered and the license periods have commenced for consolidated entities. Included in these totals for Q3 2011 are 20 half-hours - $0.92 million (Q3 2010-16.0 half-hours - $0.90 million) for other proprietary titles where the Company has Canadian rights and other rights, which are being accounted for using the percentage of completion method. Q3 2011 proprietary deliveries were at the low end although in line with scheduled deliveries and Management's expectations.For Q3 2011, distribution revenues were down slightly 2% to $1.64 million from $1.68 million for Q3 2010, generally due to timing of license periods for existing contracts on hand and the lagging effect on distribution revenues of fewer Fiscal 2010 deliveries. For Q3 2011, the Company recognized revenue on several contracts throughout its existing library and delivered episodes of newer titles. Some of the more significant sales were on the following titles: Dirtgirlworld Season I, The Latest Buzz Seasons I-III, Animal Mechanicals Seasons I - III, Martha Speaks Season I and II, Grandpa in my Pocket Seasons I and II, Super Why! Season I, Kid vs. KatSeasons I and II, How to be Indie Season I, and Waybuloo Seasons I and II.As DHX Media's business model matures, largely as a result of the experience our in-house international television distribution team has gained over the years along with the licensing expertise the Company has gained from the Wildbrain acquisition, the Company is now strategically targeting for acquisition third party produced titles for IP rights. The Company is aggressively pursuing and adding half-hours to the library deploying this strategy. Due to our strong balance sheet and position in the industry, we are able to add significant exploitation and distribution rights through this avenue without taking great risks on capital. The Company has added 15 half-hours of third-party produced titles, where the Company owns significant IP rights, for Q3 2011. This strategy remains consistent with our previously stated goal of increasing, by 5-10% annually, the Company's library totals for new titles upon which the Company owns IP rights.For Q3 2011, Management was very pleased with the growth in the category of producer and service fee revenues as the Company earned $4.22 million, an increase of 225% over the $1.30 million for Q3 2010.For Q3 2011, music and royalty revenues, including M&L, increased 382% to $2.41 million (Q3 2010-$0.50 million). Overall, music and royalty revenues, including M&L, were up 382% mainly due to the addition of DHX Wildbrain, specifically for Yo Gabba Gabba. Traditional DHX music and royalty revenues, including M&L, was $0.24 million for Q3 2011 (Q3 2010-$0.50 million). Gross Yo Gabba Gabba revenues were $0.14 million for the live tour and $1.47 for other M&L.For Q3 2011, new media revenues increased to $1.42 million (Q3 2010 - nil), including $1.38 million for the start of UMIGO (see Nine Months 2011 New Media Revenues section of DHX Media's Q3 2011 MD&A for further details).Gross Margin Gross margin for Q3 2011 was $5.51 million, an increase in absolute dollars of 65% compared to $3.34 million for Q3 2010.  The overall margin at 45% of revenue for Q3 2011 was above Management's expectations. For Q3 2011, the margins for each revenue category in absolute dollars and as a margin percentage are as follows: production revenue margin of $0.75 million or 30%, net producer and service fee revenue margin of $2.00 million or 47%, distribution revenue margin of $1.18 million or 72% ($1.07 million or 65% when $0.11 million for the amortization of acquired libraries is removed), new media margin at $0.08 million, and rental revenue margin of $0.10 million. For Q3 2011, music and royalty revenue, including M&L, less direct costs were $1.40 million. The breakdown for music and royalty margin (including M&L) was $0.80 million for traditional DHX music and royalty, $0.04 million margin for Yo Gabba Gabba Live! tour, and $0.56 million margin for M&L on other Yo Gabba Gabba licenses.SG&A SG&A costs for Q3 2011 were up 37% at $4.14 million compared to $3.03 million for Q3 2010. Specifically, SG&A costs (excluding DHX Wildbrain) for DHX Toronto, DHX Vancouver, and DHX Halifax were $2.99 million (Q3 2010 $3.03 million) and SG&A costs for DHX Wildbrain for Q3 2011 were $1.15 million (Q3 2010 nil). Q3 2011 SG&A costs (excluding DHX Wildbrain) at $2.99 million were down 2%  as compared to Q3 2010.Development Expenses and OtherDuring Q3 2011 development expenses and other, all related to development expense, were $0.21 million (Q3 2010 nil).EBITDAFor Q3 2011, EBITDA was $1.46 million, up $0.98 million or 204% over $0.48 million for Q3 2010. For Q3 2011, this increase was due to the increase in gross margin dollars of $2.17 million, offset by an increase in SG&A of $1.12 million and a $0.07 million decrease in non-cash stock based compensationThe full unaudited Q3 2011 interim financial statements and MD&A are available on SEDAR at www.sedar.com and will be available on the Company's website www.dhxmedia.com.About DHX Media Ltd.DHX Media Ltd. is a leading international leader in television production and distribution, interactive content and entertainment licensing, with an emphasis on children, family and youth markets. With offices in Toronto, Halifax, Vancouver and Los Angeles and three award-winning production facilities, including the recently acquired Wildbrain Entertainment, DHX Media is the producer or co-producer of over 60 original television series and maintains a library of over 2,450 half-hours of television productions that spans both animated and live action programming.   Live action series include That's So Weird, How to be Indie and This Hour Has 22 Minutes; animated series include Yo Gabba Gabba!, Animal Mechanicals, Kid vs Kat, dirtgirlworld, Franny's Feet, Martha Speaks and new preschool show Rastamouse. DHX Media Ltd. shares are listed on the TSX, the Toronto Stock Exchange.  www.dhxmedia.com DisclaimerThis press release contains forward looking statements with respect to the Company. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, such statements involve risks and uncertainties and are based on information currently available to the Company. Actual results may differ materially from those expressed or implied by such forward looking statements. Factors that could cause actual results or events to differ materially from current expectations, among other things, include risks related to market factors, customer contract interpretation, application of accounting policies and principles, and production related risks, and other factors discussed in materials filed with applicable securities regulatory authorities from time to time including matters discussed under "Risk Factors" in the Company's short form prospectus dated April 9, 2010 and in the Company's Amended Annual Information Form incorporated by reference therein. These forward-looking statements are made as of the date hereof, and the Company assumes no obligation to update or revise them to reflect new events or circumstances.  For further information: Enquiries:   DHX Media Ltd.                      +1 902-423-0260 David A. Regan - EVP, Corporate Development & IR